The Week Ahead – Trump, the FED Chair and the Shutdown in Focus

While the holiday season upon us, Trump’s talk of sacking the FED Chair and market angst over the economic outlook will influence in the week ahead.
Bob Mason

On the Macro

For the Dollar, it’s a quiet week ahead, with key stats limited to house price figures on Wednesday, December consumer confidence and new home sales numbers on Thursday and pending home sales figures, trade data and PMI numbers out of Chicago on Friday. Focus will be on the housing sector and consumer confidence numbers, though expect some market response to Friday’s trade data, another widening in the trade deficit likely to rile U.S President Trump and the markets. Outside the numbers, talk of Trump looking to fire FED Chair Powell could give the market some swings in the shortened week. The Dollar Spot Index ended the week down 0.50% to $96.956.

For the EUR, it’s a particularly quiet week with the European markets in a shortened week, the ECB economic bulletin and job seekers numbers out of France the first numbers to consider on Thursday. While we would expect some market response to the ECB’s economic bulletin, which is unlikely to be EUR positive, prelim inflation numbers out of Spain and Germany will also provide direction for the EUR on Friday, Spain’s finalized GDP number unlikely to have an impact on the day. The EUR/USD ended the week up 0.58% to $1.1372.

For the Pound, there are no material stats scheduled for release through the week, leaving market sentiment towards Brexit and the state of UK politics to provide direction through the week, neither a positive. The GBP/USD ended the week up 0.48% to $1.2645.

For the Loonie, there are no material stats scheduled for release through the week, leaving the Loonie in the hands of crude oil prices, the combined effect of a dovish BoC and sliding crude oil prices doing the Loonie bulls few favours. The Loonie ended the week down 1.63% to C$1.3602 against the U.S Dollar.

Out of Asia, it’s a quiet week ahead.

For the Aussie Dollar, economic data is limited to November private sector credit figures due out on Friday, which will provide some direction, with general sentiment towards the global economy and reaction to China’s decision to ease policy further to support growth drivers through a shortened week. The Aussie Dollar ended the week down 1.84% to $0.7040.

For the Japanese yen, economic data scheduled for release through the week includes November employment figures, prelim industrial production and retail sales figures and December inflation numbers out of Tokyo on Friday. While the numbers will provide further guidance on the state of the Japanese economy through the 4th quarter, impact on the Yen is likely to be minimal at best, with market risk appetite the key driver. Outside of the numbers, November’s BoJ policy meeting minutes and a scheduled BoJ Governor Kuroda speech will be there for consideration, though there’s unlikely to be anything new to hit the Yen. The Japanese Yen ended the week up 1.91% to ¥111.22 against the U.S Dollar.

For the Kiwi Dollar, there are no material stats scheduled for release, leaving risk sentiment to provide direction through the week. The Kiwi Dollar ended the week down 1.02% to $0.6728.

Out of China, with no material stats scheduled for release through the week, it’s all about the ongoing U.S – China trade war and the Chinese government’s attempts to prevent an economic meltdown.

Geo-Politics

Brexit: Its Christmas week, which means no votes of no confidence and no last minute dashes to Brussels by the British PM. Britain’s departure date from the EU is looming however, with the 14th January parliamentary vote expected to bring an end to 2-years of wrangling, assuming the EU stands firm on its no negotiation position. With the global economy looking ripe for a slowdown, the Establishment may be giving it a long hard think, a no deal Brexit forecasted to have a material impact on the world’s 5th largest economy, which won’t be ideal for a slowing EU economy.

U.S – China Trade War:  There’s no progress, with more news of espionage a negative, a lack of progress on trade talks likely to raise the prospect of fresh tariffs. It’s going to be a quiet week, but there’s plenty to consider ahead of the markets resuming normal trade later in the week.

The Rest

On the monetary policy front,

For the JPY, the BoJ’s November monetary policy meeting minutes are due out on Wednesday, which will provide little to no direction for the Yen, the BoJ now in a spot of bother, with economic indicators suggesting a possible economic slowdown and a lack of monetary policy tools an alarming situation for the Japanese economy.

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